Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 25,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 20,100 tons. Based on projected production and sales of 20,100 tons, the company estimates the following income using absorption costing Sales (20,100 tons at $148 per ton) Cost of goods sald (20,100 tons at 368 per ton) Gross profit Selling and administrative expenses Income Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment. Direct materials Direct labor $ 1,540,000 1,206,800 334,890 334,098 $0 Variable overhead Fixed overhead ($884,098/20,100 tons) $ 13 per ton $4 per ton $3 per ton 3 40 per ton Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $213.400 per year. The company's president will not earn a bonus unless a positive income is reported. The controller mentions that because the company has large storage capacity, it can report a positive income by setting production at
Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 25,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 20,100 tons. Based on projected production and sales of 20,100 tons, the company estimates the following income using absorption costing Sales (20,100 tons at $148 per ton) Cost of goods sald (20,100 tons at 368 per ton) Gross profit Selling and administrative expenses Income Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment. Direct materials Direct labor $ 1,540,000 1,206,800 334,890 334,098 $0 Variable overhead Fixed overhead ($884,098/20,100 tons) $ 13 per ton $4 per ton $3 per ton 3 40 per ton Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $213.400 per year. The company's president will not earn a bonus unless a positive income is reported. The controller mentions that because the company has large storage capacity, it can report a positive income by setting production at
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...
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